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Thursday, September 17, 2009

Friedman touts feed-in tariffs

In his column this week, NYT pundit Thomas Friedman is calling for more aggressive US spending to promote solar energy, to provide predictable support for solar entrepreneurs.

Noting the location of Applied Materials factories in Germany, China and elsewhere, Friedman concludes:
The reason that all these other countries are building solar-panel industries today is because most of their governments have put in place the three prerequisites for growing a renewable energy industry:
1) any business or homeowner can generate solar energy;
2) if they decide to do so, the power utility has to connect them to the grid; and
3) the utility has to buy the power for a predictable period at a price that is a no-brainer good deal for the family or business putting the solar panels on their rooftop.
The latter appears to be a reference to feed-in tariffs. Apparently Friedman seems not to have noticed the disaster of the Spanish feed-in tariffs (as reported by Paul Voosen of Greenwire on the NYTimes.com website).

Some might argue that the Spaniards had the right idea, but they just set the price wrong — using the same rate as for cloudy Germany. But that’s the point: when you set a price via government fiat rather than through supply and demand, you don’t know whether the price is right or wrong. The advantage of a direct government purchase subsidy is that at least you know how much you’re distorting the price system (10%, 20%, 30% etc.).

I think the Friedman article is also silly in implying there’s no US solar industry. There’s a thriving industry, with particularly high concentration of such firms here in the Bay Area. If Friedman is concerned about US manufacturing, perhaps he should read the recent Greentech Media report on US PV manufacturing.

Of course, that’s part of the problem with pundits: Friedman is a best-selling author and a very smart guy who thinks that makes him an expert in everything. I’m only slightly less guilty here, but at least I’ve made an ongoing effort to meet and understand real PV experts.

Which brings me to last week’s meeting of the Silicon Valley Photovoltaic Society. The speech by SunPower’s Doug Rose was written up by Greentech Media, and Rose’s slides are on the SVPVS website.

It was Rose’s response to a question that made me first aware of the Spanish fiasco. Speaking for Sunpower, Rose said “We are not in favor of ridiculous things that distort the market.” His suggestion was that the feed-in tariff rate should have been set by a reverse auction. He also implied that Spain should have phased in its program, rather than going from 0 Gw to 2.5 Gw in a single year.

I would note that apparently it's easier to get permits to build utility-scale solar facilities in Spain than anywhere in California. Perhaps Friedman should be arguing for a policy to reduce government barriers to building solar plants (PV and thermal) and the necessary transmission lines.

Another question noted how IC production went offshore and asked whether PV will do the same. Rose noted a number of key differences (I wish there was video) in the value creation between IC and PV semiconductors, including the high value of IC wafers that make it cost-effective to ship via air express.

Rose noted PV systems are bulky and heavy, and less valuable for pound than integrated circuits. Of necessity, final assembly will be done in the continent of use, and Rose said that some upstream manufacturing may eventually come back to the US.

Update, Friday 8:30am: After taking his own tour of the Applied Materials factory, Eric Wesoff of Greentech Media is also critical of Friedman — noting that much of the vaunted German feed-in tariff is shipped to China for the purchase of those solar panels.

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